Fan Controlled Football Pull The Plug on Season 3

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This week, there were a few potential topics to discuss but I’ve chosen (through the help of LinkedIn) to discuss the recent news of Fan Controlled Football pulling the plug on season 3.

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🏈 Fan Controlled Football Pull the Plug on Season 3

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Fan Controlled Football (FCF) have cancelled their third season and are pivoting to tech licensing.

So just how did FCF, who raised $40m in Jan 2022 end up closing the doors to their main proposition 18 months later?

In this newsletter, I discuss:

🏈 What is Fan Controlled Football?❓ The situation?🤖 Will their pivot work?

🏈 What is Fan Controlled Football?

Fan Controlled Football (FCF) set out to democratise a 7vs7 American Football League.

They did so via NFTs that let owners make decisions that spanned anything from the rules of the actual game to the next play in-game.

Their focus was on a fast-paced model — every week fans participated in a live draft to determine players and teams that will play that week. They used instant gratification, compressing a classic league format into something much shorter, with games lasting only one hour.

There was a level of gamification as well with the concept of ‘FanIQ’, which increases the more you interact with FCF. Gain enough ‘FanIQ’ and the higher your level, the more your voting power increases.

Games were played on a 50-yard field indoor arena and streamed live on Twitch, NBCLX, DAZN, fuboTV and more.

And from the outside in, and according to stats that founders have mentioned in various articles, the first two seasons were a great success:

• FCF have more than 230,000 registered fans and that level of fandom makes them a top 10 sports app in U.S.

• 2.4 million live viewers per week

• Over 100 million highlight views across all platforms.

• FCF increased viewership from 375,000 per game at the start of season one to 1.39 million at the championship game of season two.

• 75% of fans that download the app vote on drafts, substitutions and plays showing high engagement rates

They raised $55 million in venture capital, including a $40 million Series A in January 2022 which was intended to fund two additional years of the league.

But it now seems as though the money raised isn’t enough to fulfil the promise of that second year. It’s also stopped plans of cross-sport expansion — as FCF had teased a basketball league with FCF-like features.

So why is a greenfield league that seemed to be growing in popularity shuttering its doors, at least temporarily?

❓ The Situation

Fast forward to the end of 2022 and the league was running out of cash. And before the start of a planned third season that was due to begin in May 2023, FCF pulled the plug.

As per Sohrab Farudi, Co-founder of FCF’s parent company:

He was also quoted in Sports Business Journal saying “that although starting a third season was a possibility, low cash reserves and challenging capital markets risked a mid-season shutdown that would have jeopardised the company’s future.”He did, however, say that there was a possibility that the league could restart should FCF find buyers at adequate prices for the franchises within the league. The asking price for a team is reportedly said to be at least a “high” six-figure sum and the company is confident of selling eight franchises, the owners of whom would be responsible for their finances. In one interview, Farudi said that the “franchise fees would provide the league with the capital to the run league operations for multiple years.” 

Where FCF’s parent company see their real future seems to be on the tech side of their proposition.

Their founders say there is considerable interest in the company’s tech solutions, and thus, FCF are now pivoting to license their software, including their fan voting tools, for example.

🤖 Will their pivot work?

The 'tech licensing' pivot doesn't surprise me.

Most VCs look at propositions like this in a very cold way, evaluating something like a fun, new sports league with some cool infrastructure on the back end — in a way that leads them to believe the underlying tech is or could one day be more valuable than the league.

This is logical because it’s easier to project scale and extrapolate recurring revenue, rather than how big sporting league IP will become. And often, VCs aren't seeing the potential in the novelty of the sport, league or idea - it's often the tech. That’s also because the likelihood of a greenfield sports league taking substantial eyeballs away from legacy players is very small. The Pickleballs of this world don’t come around too often!

FCF have at least with their two seasons of play, shown that their tech works at scale.

I don’t think, however, that their software licensing business is likely to be a sustainable moat. It could be if they get some huge, chunky deals over the line with guaranteed income over a period of years, but I’m unsure if those are on the horizon, nor if they’re very frequent considering markets right now.

At the levels of capital that was raised, will the FCF holding company ever generate revenues that grow into their valuation?

Especially in such a crowded market. The vendor list that sports properties and leagues have at their disposal is huge and competition is stiff.

There are also some other interesting tailwinds they’re fighting — such as sporting leagues or federations creating their own accelerators and often investing in businesses they think could be vendors for them in the future. This is a long play to ensure leagues get the best bang for their buck when working with vendors, and what better way to do so than owning a piece of one? Even if they get contracts to facilitate some of the tech that underpins fan engagement platforms for some big hitters, is that only a temporary solution?

🧠 Concluding Thoughts

Even though the numbers are impressive, FCF always felt like a niche in sports.

Not every fan wants that level of involvement in their respective sports team or league. There is a misunderstanding, perhaps an assumption from people in tech that sports fans want involvement and participation at every level of the game they’re watching.

This is absolutely not the case. Not every fan wants to call the next play or be involved in changing the rules of the game. Finding an enthusiastic audience that wants to be actively engaged in every moment, is difficult.

FCF was a good idea in principle that was always going to be incredibly difficult to scale sustainably.

Running any sports league costs a lot of money, and with the underlying concept being fairly niche - scale was always hard to come by. This is especially the case if you consider the lack of franchising from the off, something I’m sure the league owners regret not doing sooner.

The idea in principle is stronger than say fan tokens, which in their current guise are speculative at best and the decision-making is extremely cosmetic and surface level. But at the same time, has FCF fallen prey to being ‘too’ engaging and therefore too niche, with scaling and monetisation issues?

Overall, perhaps sports fans want to... simply watch sports, at least in the short term?

There will be a market for this, but I think it will remain niche.

The way fans engage with sports is changing, faster than you think, but there needs to be a balance between 'active' and 'always on' engagement and 'passive engagement'.

The idea that every sports fan wants to ‘actively’ engage in something they have done so fairly passively their entire life is probably ahead of its time at best.

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